THE IMPACT OF FINANCIAL RATIOS ON STOCK MARKET RETURNS ON SOME SELECTED NIGERIAN BREWERY FIRMS

ABSTRACT

This study looks at the extent to which certain finance-based ratios affect the stock market returns of a few chosen breweries listed on the Nigerian bourse's floor. Earnings per share ratio (EPS), price earnings ratio (PE), and market to book value ratio (MBV) are among the finance- based measures used. Book value ratio was used as a control variable. The study applied the multiple regression methodology, which makes it simple to analyze the impact of a group of independent variables (regressors) on a chosen dependent variable (regressand), with a focus on the Nigerian stock market, using daily stock market returns data for a time period spanning from the financial year ended 2008 to 2013. With a focus on the Nigerian stock market, the study used the multiple regression methodology, which makes it simple to analyze the effects of a number of independent variables (regressors) on a chosen dependent variable (regressand). The outcome demonstrated that the market returns performance of the tested brewing firms were significantly impacted by the earnings per share (EPS) ratio. The study also found a strong correlation between Nigerian publicly traded beer enterprises', stock returns and the price–to earnings (P/E) ratio. The study also showed that the selected publicly traded beer enterprises' stock returns are significantly impacted by the Market Value to Book Value (MBV) ratio. Overall, the empirical data is consistent with the idea that market-based financial ratios do have a minimal influence on stock market outcomes in frontier markets like Nigeria. The paper makes the suggestion that Nigeria work on creating and putting into effect comprehensive capital market master plans and country-specific financial sector reforms. Such reforms should, in particular, be directed by the adoption of international best practices and standards covering topics like corporate governance, monetary policy transparency, data dissemination in the financial market, and the regulation and supervision of the banking system.